Budget 2025: What It Means for You, Your Business, and KiwiSaver

Budget 2025: What It Means for You, Your Business, and KiwiSaver

On 22 May 2025, Finance Minister Nicola Willis delivered New Zealand’s Budget 2025. Set against a backdrop of modest economic growth and rising fiscal pressures, the Budget outlines a roadmap focused on targeted investment, business support, and retirement savings reform. Below, we unpack the key highlights that matter to business owners and individuals alike.

📈 Economic Snapshot

• GDP growth is forecast at 4.9% for 2025–26.

• Net debt is projected to peak at 46% of GDP in 2027/28, with a return to surplus expected in 2027/28.

• Inflation and cost-of-living pressures remain a core challenge, influencing both spending priorities and savings policies.

💼 Investment Boost for Businesses

One of the standout initiatives in Budget 2025 is the Investment Boost — a tax incentive designed to help businesses reinvest and grow.

Key Features:

• Businesses can deduct 20% of the cost of eligible new assets (like machinery, technology, or equipment) immediately in the year of purchase.

• The remaining 80% is depreciated as usual over time.

• Applies to new, business-use assets — excludes land, buildings, or second-hand items.

Example:
If your business purchases $100,000 worth of new equipment, you’ll be able to claim an immediate $20,000 deduction — improving cash flow and reducing tax payable for that year.

This measure is designed to stimulate productivity and modernisation, particularly for small to medium enterprises (SMEs).

🏦 Major KiwiSaver Reforms

Budget 2025 introduces the most significant changes to KiwiSaver in over a decade, affecting both employers and employees, as well as future first-home buyers.

1. Default Contribution Rate Increases

• Current rate: 3%

• From 1 April 2026: Increases to 3.5%

• From 1 April 2028: Increases to 4%

This applies to both employee and employer contributions.
Employees can apply to Inland Revenue for a temporary reduction if needed (up to 12 months).

2. Reduced Government Contributions

• From 1 July 2025, the member tax credit is being halved:

  • Before: 50c per $1 contributed, up to $521.43

  • Now: 25c per $1, capped at $260.72

• High earners (income over $180,000) will no longer receive this government match.

3. Changes for First-Home Withdrawals

• The government’s contribution will no longer be withdrawable when using KiwiSaver for a first home deposit, effective 1 July 2025.

4. New Support for 16–17 Year Olds

• From 1 July 2025, 16- and 17-year-olds will be eligible for government contributions.

• From 1 April 2026, employers will also need to make matching contributions for this age group.

What This Means for Employers:

• Review payroll systems and employment agreements ahead of the upcoming rate increases.

• Plan for the higher employer contribution costs.

• Communicate changes clearly with staff and help them understand their options.

🏥📚🚓 Targeted Sector Investment

Budget 2025 includes focused funding in critical areas:

• Health: $5.5 billion to improve hospitals, GP access, and Pharmac funding.

• Education: $381 million for learning support and school infrastructure.

• Law & Order: $263 million to support police, reduce court delays, and manage prison capacity.

• Infrastructure: $6.8 billion for roads, rail, and public transport projects.

✅ What Should You Do Next?

• For Businesses: Consider how the Investment Boost can support your 2025 asset purchases.

• For Employers: Prepare now for KiwiSaver contribution increases and payroll compliance.

• For Individuals: If you're planning to use KiwiSaver for a first-home withdrawal, do so before 1 July 2025 to access the full member tax credit.

🧾 Need Help Making Sense of It All?

Whether you’re reviewing your KiwiSaver strategy, planning a major purchase, or updating payroll systems — we’re here to help. Feel free to get in touch for advice tailored to your business or personal situation.